The Top 2 Pricing Perils Every Business Encounters

Don’t get fooled, pricing your products is NOT easy! If you think it is…then you’re likely doing it wrong (and probably need to charge more). Did you know you could increase how much you sell when you price products right? Remember, you’re building the infrastructure for a business that will thrive (not just merely survive) in the long run. What happens if you’re doing it wrong? Well, the truth is your business may never recover. It’s important to understand that the price of your products determines the success (or failure) of your business – it’s THAT important! In this post I’m going to discuss the consequences of over and under pricing.

Before I get started I want to get a few things off my chest:

  • Despite all the different kinds of pricing strategies, there is no guaranteed, one-size fit all method. No single technique will work for every product, business, and market. This is because pricing is just as much of an art as it is a science.
  •  If you believe “price [alone] drives sales,” then you are making a HUGE mistake. This is NOT TRUE! Sales skills are what drive sales, period. This means understanding your customers, figuring out the right sales strategy, and hiring the right people to do the selling.

Now, onto the crux of this post. These are the top two pricing perils every business encounters – under pricing and over pricing:

  1. Under Pricing: It’s a good idea to reduce your prices during an economic downturn. FALSE – pricing your products too low always cuts into profits. Furthermore, this makes it that much more critical to accurately price your products in a down economy. When you drop your price to increase volume, (don’t kid yourself) you’re just convincing consumers that your products are cheap. Not a prudent approach. You don’t want your customers to think your products junk. The “race to the bottom” with the lowest price approach is not sustainable in the long run, so don’t go cheap. 
  2. Over Pricing: Overpricing can be just as damaging as underpricing. TRUE – Really? Indeed! This is because pricing beyond the customer’s desire to pay actually decreases sales. Remember, customers just want a fair price. Yes, you need to make a profit. However, know your customer and be knowledgeable about what they are willing to pay.

Thanks to ETC Guest Blogger

Paul Hill – Utah State University Cooperative Extension

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Small Business Marketing Trends for 2013

I love reading SmallBusinessComputing.com – they have some great ideas and thoughts about helping Small Business Owners with their online marketing journey.  Sometimes due to so many other good reads I don’t always get to the best articles and ones I like to share – this one in particular emphasizes some things that we have been telling businesses in our educational workshops and so therefore I am going to take some time and go into some more detail about each of the trends!  The article Top 5 Small Business Marketing Trends for 2013 highlights 5 Trends:

  1. Mobile Marketing Is Here and Now
  2. Content and Content Promotions is the New SEO
  3. Email Marketing:  Focus on Mobile Optimized Messages
  4. Personalize and Customize Ecommerce Marketing
  5. Social Advertising is Hot

Tune if for more Mobile Marketing but in the meantime read the article – Top 5 Small Business Marketing Trends for 2013

Pricing – Did You Include…

Pricing of your products and services is a science and an art. The latter involves prices that end at 99 cents or 95 cents as well as keeping under certain spending levels such as $50 or $100.

The science side of pricing includes knowing what your costs are, your break-even price, and your needed markup that will give you a profit. Profits are a necessary thing if your goal is to remain in business long term.

In this blog, I just want to touch on four items often missed in calculating the cost of doing business. These include:

  1. Shrinkage/spoilage/theft – This category goes by various names and actually includes a variety of items that cost you money. Some of it is items that walk out the door. It also includes defective items. If your business deals with items that can spoil, then you need to take that loss into account.
  2. Returns – Not everyone who buys something will keep it. Some of it will come back in the door as a return. While you may be able to resell some, there will be items that you just need to absorb as a cost. In service work, this area may include work you need to redo for a customer.
  3. Sales – It would be great if everything you sold went for your full asking price. But we all know that won’t happen. So in developing your pricing strategy, you need to consider the level of discounting you will probably need to do at various times to move your goods and services. Product businesses are faced with “last year’s model” while service businesses often have slow seasons. And all businesses face variable general business economic conditions.
  4. Slow paying accounts – Wouldn’t it be nice if everyone just paid cash. But some pay with credit card and that means various associated charges. Still others may set up an account. Most of those accounts will pay promptly and on a regular basis. Others however will take their time in paying. Check out this article from Intuit for tactics on dealing with this issue – http://bit.ly/VIsGJc 

 The science aspect of pricing can be frustrating. The four items covered in this blog post do not cover all the areas impacting the pricing decision. It is meant to highlight some common areas missed and to help you, the owner, develop a solid pricing strategy that keeps you in business a long time. 

Does Pricing Make You Nervous?

In my conversations with business owners, they indicate two parts of pricing that make them feel uncomfortable. The first fear is in setting the right price. Comments made include “feeling unsure,” “don’t know where to start,” or “not knowing what they need to cover all of the costs.” And they often wonder who they can turn to for help. 

The second fear is even after prices are set, owners feel uncomfortable discussing their prices with customers. They think they may scare customers away or that they have priced their goods too high (or too low) and that they are not competitive. And listing prices, especially for businesss such as in the service industries, is just scary to them.

Being comfortable with your pricing means you:

  • Know all of your costs and the profit margin you need – Check out our Friday Facebook page, 3/15.
  • Beyond direct costs, understand you need a return on investment, that you need to pay taxes, paying yourself a salary (both for your work but also your management skills and time)
  • Know where your competitors are at
  • Consider the value/benefit you are bringing to the consumer
  • Being open with your pricing. This article,  http://bit.ly/u2FjS3, discusses this further.

The pricing process may feel like working in a black box. It need not be that way. There are tools to help you out. Also there are a variety of people willing to help out. Your CPA and banker should be on that list as should other small business support efforts.

Interactive Magazine Provides Solutions for Marketing AgriToursm Online

How are you going to get them back on the farm?

The University of Nebraska-Lincoln Extension Service and North Dakota State University Extension Service have teamed up to answer that question. A recently released interactive online magazine, “Marketing Agritourism Online,” is geared to help agritourism enterprises attract customers. The program is available at http://go.unl.edu/agritourism 
 
Agritourism is defined as any agriculture-based operation or activity that brings visitors to a farm or ranch. Examples are U-pick fruit farms, farm stands or shops, farm stays, tours, on-farm classes, fairs, festivals, pumpkin patches and Christmas tree farms.
 
 “Many individuals today are looking to experience some part of the rural life,” says Glenn Muske, NDSU Small Business Specialist. “Whether going out to pick berries, getting lost in a corn maze, taking a trail ride, going hunting or just experiencing what one’s parents or grandparents did, consumers are turning to rural attractions as tourist destinations.”
 
Marketing Agritourism Online offers agritourism businesses a tool to reach a targeted audience with a focused message about what they have to offer.  
 
“Finding the potential agritourism customer has always been difficult,” says Muske,. “And being able to tell prospective clients your story and what they will experience has also been a challenge.”
 
Marketing Agritourism Online helps meet those challenges. This self-directed course and resource guide focuses on helping the agribusiness owner understand and plan for:
 
* Being online: Agritourism business owners will gain an understanding of direct online marketing, the associated technology and the “experience” economy, or where you and your activities become part of the actual event
 
* Getting found – Just being online does little to create awareness that a business exists. The program shows agritourism businesses how to develop and communicate their brand and get found when someone does a search.
 
* Being customer focused – Agritourism businesses get help in determining their marketing effectiveness, understanding what information they need to include on their website and developing online marketing tools.
 
* Telling others – Agritourism business owners learn how to encourage customers to help spread their story, along with how to remain engaged with people as a returning customer, a brand advocate or an ongoing buyer/user of the products and services offered. Business owners also receive information on using customer testimonials and tips on making short video clips of customers talking about their experiences.
 
Learning from others who have promoted their business online successfully makes this interactive online magazine unique and especially helpful to the business owner, according to Jay Jenkins, UNL Extension Educator. The online magazine includes video clips of Nebraska agritourism operators Sarah Sortum, with Calamus Outfitters, http://www.calamusoutfitters.com/ and Regina Ochoa, with RLazyJ at Whitney, Nebraska http://www.rlazyj.com and a member of the Nebraska High Country – http://www.nebraskahighcountry.com/, as well as three agritourism owners from North Dakota, David Pearce- http://papaspumpkinpatch.wordpress.com/; Rodney Hogen – http://www.redtrailvineyards.com/; and Jeremy Doan –  http://www.rollingplainsadv.com/. These video segments provide examples of effective online marketing.
 
“The goal of the online magazine is to help the business owners effectively use this tool, online marketing, to reach, engage and eventually bring in new customers while encouraging previous customers to return,” Jenny Nixon, UNL Extension Educator. “Today an effective marketing strategy must be integrated using all possible tools, including social media.”
 
Agritourism businesses and other small-business owners also can keep up with changes in online marketing tools and trends by subscribing to a free weekly newsletter, Direct Marketing, at http://paper.li/UNLeShip/1319999929
 
“Agritourism is all about experience,” according to Jenkins. “The customers’ experience begins long before they ever come to your business. It begins with their contact with you and will continue long after they leave.
 
“You want to help shape the customer’s expectations, ensure those expectations are met and, finally, to become an ambassador for your agritourism business,” he adds. “Marketing Agritourism Online is designed to help these three things happen.”
 
The interactive online magazine was made possible through the support of UNL Extension and NDSU and funding from the Southern Rural Development Center’s National eCommerce Initiative.
 
For more ideas and assistance on marketing for your small business, contact your local Extension Service office or go to UNL Extension’s website at http://eship.unl.edu or NDSU’s Small Business Support website at http://www.ag.ndsu.edu/smallbusiness

Pinterest for Your Business Webinar – March 14

Pinterest for Your Business Webinar
March 14
2:00 p.m. (ET); 1:00 p.m. (CT); 12:00 p.m. (MT); 11:00 am (PT)
Connect to webinar – https://connect.extension.iastate.edu/etc-cop

eXtension – Entrepreneurs and Their Communities
Learn how to better utilize Pinterest for your business when you attend!Just when you thought you’d gotten a handle on social media by getting on Facebook and maybe giving Twitter a try, along comes Pinterest. Pinterest is now the number three most-popular social network in the U.S., behind only Facebook and Twitter, according to Experian’s Digital Marketer Trend and Benchmark Report.  Thru this webinar an introduction to what Pinterest is and why you should use it for your business will be presented. Also discussed will be setting up a Pinterest account, how to interact, and how to create pin boards.

Presenters Tara Gross is a young entrepreneur and owner of Country Drawers in Cambridge, Nebraska and Connie Hancock is an Extension Educator from UNL Extension.

To learn more about other eXtension educational programs – https://learn.extension.org
eXtension Entrepreneurship – http://www.extension.org/entrepreneurship

Recording of eXtension Webinars – http://www.extension.org/pages/16076/etc-webinar-archive